Deposit, lending rates set to rise, but not before Oct.

Lending and deposit rates are set to rise following the hike in repo and reverse repo rates by 25 basis points and 50 basis points respectively by the Reserve Bank of India.But the hikes may not be effected before October as credit growth is yet to pick-up, say bankers. It is also likely that deposit rates may go up before lending rates as there is a need to improve the sluggish deposit growth. According to the CMD of Union Bank of India, deposit rates will have to go up in order to incentivise savers. "Deposit growth is lower than the RBI's projection. If it continues to be low, it cannot support the credit growth, which will pick up in the busy season. So the priority at this point of time has to be deposit growth",he said. The same view has also been shared by some other bankers.(BL 17092010)

Finance Ministry gets SBI's formal proposal for raising capital

The Finance Ministry has received a formal proposal from State Bank of India for its capital raising plans during 2010-11, a senior official has said. Mr. R.Gopalan, Secretary(Financial Services) told that they had formally received a proposal. The actual instrument has not yet been decided. There will be discussions between the Finance Ministry and SBI. After that only the capital raising route will be finalised. The SBI Chairman,Mr. O.P. Bhatt had earlier said that the Bank was looking to raise capital to the tune of about Rs 20,000 crore through a right issues before the end of the current fiscal.(BL 20092010)

Oriental Bank raises Rs 500 crore capital

Oriental Bank of Commerce (OBC) has raised capital of Rs 500 crore to fund business growth and strengthen its capital adequacy.This is the first time in the current fiscal that the Bank has mobilised capital.Of the Rs 500 crore capital raised, the Tier-I capital component stood at Rs 300 crore and the Tier-II capital was Rs 200 crore.For Tier-I capital raising, perpetual debt instruments with annual coupon of 9.05% was issued. For Tier-II capital raising, bonds with annual coupon of 8.68% was issued,a bank official said.(BL 20092010)

Banks press pause button on power loans

The power sector could run into a funding crunch as banks are going slow on lending.Many lenders have hit the sectoral credit exposure limit and concerns have emerged over environmental and coal mining clearances.As a precautionary measure, banks are laying down conditions such as tying up coal linkages.Some are even insisting that the coal supply should be only from within India and not from countries such as Indonesia and Australia, from where a lot of companies are now trying to source coal. But, domestic coal production is beset with its own set of problems like obtaining clearances from the Ministry of Environment,which can take ages or may not come at all. A senior official from a public sector bank said that currently, disbursements are only for power distribution and transmission projects.(BL 20092010)

Banks see gains from inclusion.

No-frills accounts are proving to be a growing business opportunity.SBI's business correspondent outlet in the middle of Mumbai's Dharavi's grime run by ageing LaduLal Jain which started around four months ago has brought a silent revolution for 2000 account holders there. Mr. Jain's outlet remits around Rs 1,00,000 a day.Account holders can send a maximum of Rs 10,000 on which they pay just Rs 25 as commission, he says. It earns 60% of that and the Bank keeps the rest. Jain expects to exhaust the limit of 2500 accounts very shortly and may seek permission to open more accounts. His expense is a modest Rs 20,000 on mobile phones and a printer to confirm transactions, he says. Many of his account holders are migrant workers who are permitted to furnish a limited KYC disclosure, which may even be a village identity card to open an account for deposits, withdrawals and remittances.It is a revolutionary concept said a senior SBI official closely associated with the project.Costs for banks are limited to spending on a few days training and paying the business correspondents, use of hand-held instruments and other related technological investments. SBI which has enrolled 1000 BCs in the past 3 months, plans to increase the number to 50,000 in 2 years. It aims to open up to 7.5 million no-frills accounts and extend its direct and indirect coverage to 1,00,000 villages. The Bank expects to generate Rs 2,000 crore in business by the 3rd year, and is working on various models with varying commission structures.(BS 16092010)

SBI ties up with Oxigen for kiosk banking in Mumbai

State Bank of India has tied up with technology company Oxigen Services to offer kiosk banking in Mumbai and Maharashtra. To begin with , the bank is launching 50 kiosk banking outlets in Mumbai,with the first one being launched in Dharavi on Wednesday. Last month, SBI had launched kiosk banking with Oxigen in Delhi, with 30 outlets. Under the arrangement, Oxigen will provide the technology support , while Sahyog Microfinance Foundation, an Oxigen-sponsored Company which is registered as a banking correspondent(BC) with SBI, will deal with the commercial aspects of the transactions.Mr. Riten Ghose, General Manager,SBI,Mumbai, said the Bank has about four-five national level BCs and many more at the local level. For instance, there are about 500 BCs in Maharashtra. The Bank is also looking to enrol its active self-help groups as BCs.
Customers will have to open a no-frills SBI account through Oxigen Web Retailers. These are retailers who already offer services such as online bill payment and ticketing.The kiosks would be linked to SBI's Core Banking System to offer banking services such as account opening, cash deposit and withdrawals and products such as remittance, mortgages, loans, insurance and mutual funds. The accounts will be opened with minimum Know Your Customer rules and using fingerprints for identification. The limit for daily cash deposit is Rs 10,000. The Bank will pay a fee to the retailer for every account opened and every transaction - withdrawal and deposit.(BL 16092010)

Tata Motors in pact with 14 Banks

Tata Motors has tied up with 14 banks to offer customers in Kerala with loans for purchasing the Tata Nano at attractive rates of interest. More such arrangements are in process.Loans for the Tata Nano will be available at all the branches of SBI, Central Bank of India, HDFC Bank, ICICI Bank, UCO Bank, Bank of Baroda, Tata Finance etc.(BL 16092010)